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Palo Alto Shares Gain 23% in a Month: Is the Stock Still Worth Buying?
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Palo Alto Networks, Inc. (PANW - Free Report) has been on a remarkable run, with its shares climbing 23.3% over the past month. This performance has significantly outpaced both the Zacks Computer and Technology sector's 9.6% gain and the S&P 500's 8.7% increase.
Compared to its peers, Palo Alto Networks stock has left competitors like Juniper Networks, Inc. (JNPR - Free Report) and Check Point Software Technologies Ltd. (CHKP - Free Report) in the dust, with these stocks only gaining 2.4% and 10.7%, respectively, in the same period.
Such rapid gains naturally lead investors to wonder: is Palo Alto Networks still a compelling buy, or is it time to lock in profits?
One-Month Price Return Performance
Image Source: Zacks Investment Research
What’s Behind Palo Alto Networks' Recent Rally?
The recent surge in Palo Alto Networks' stock price can be traced back to a few key factors. The broader market has become more optimistic. With recession fears easing and inflation seemingly under control, there’s growing anticipation that the Federal Reserve may soon cut interest rates. This has created a favorable environment for tech stocks, especially those like Palo Alto Networks, which are deeply embedded in sectors critical to the modern economy.
Adding to this bullish sentiment, Palo Alto Networks recently delivered stellar fourth-quarter results for fiscal 2024. It reported $2.19 billion in revenues, marking a 12% year-over-year increase and beating management’s higher-end guidance range as well.
This strong performance was driven by several factors, with one of the most notable being the 43% growth in Next-Generation Security Annual Recurring Revenue (NGS ARR), which reached $4.22 billion. This growth underscores Palo Alto Networks' ability to stay ahead of the curve by innovating and expanding its offerings to meet the ever-evolving cybersecurity landscape.
Bright Prospects for Palo Alto Networks
Palo Alto Networks is well-positioned to capitalize on the growing demand for cybersecurity solutions. As cyber threats become increasingly frequent and sophisticated, the need for cutting-edge security is only going to rise. Palo Alto Networks' ongoing investments in areas like cloud security, artificial intelligence and automation are likely to drive significant future growth, cementing its position as a key player in the cybersecurity space.
The numbers speak for themselves. The global cybersecurity market is expected to expand from $172.2 billion in 2023 to a staggering $424.97 billion by 2030, according to Fortune Business Insights. With its comprehensive and innovative solutions, Palo Alto Networks is well-poised to capture a significant share of this expanding market.
Strategic partnerships have also played a crucial role in Palo Alto Networks' long-term success. Earlier in 2024, the company teamed up with tech giants like NVIDIA Corporation (NVDA - Free Report) to offer robust private 5G security solutions. These collaborations enhance PANW’s capabilities in AI-driven threat detection, particularly in emerging markets like private 5G. Such moves not only strengthen the company’s market position but also ensure that its solutions remain at the cutting edge, catering to the evolving needs of modern enterprises.
Palo Alto Networks has successfully executed its platformization strategy, which focuses on providing customers with a more integrated suite of security solutions. By prioritizing Annual Recurring Revenue (ARR) over traditional billings, the company has set itself up for more stable and predictable cash flows. This strategy has resonated well with customers, particularly those making large strategic commitments, and sets the stage for sustained long-term growth.
The consensus estimates for fiscal 2025 and 2026 suggest that Palo Alto Networks will continue to see double-digit growth in both its top and bottom lines, reinforcing the bullish outlook on its future.
Image Source: Zacks Investment Research
PANW’s Premium Valuation: A Concern
Palo Alto Networks' recent share price performance has pushed its valuation to lofty heights. The stock currently trades at a forward 12-month price-to-sales (P/S) multiple of 12.7X, significantly higher than the Zacks Internet – Software industry average of 2.58X and well above its peers. For comparison, Juniper Networks and Check Point Software trade at more modest multiples of 2.48X and 8.18X, respectively.
Image Source: Zacks Investment Research
Conclusion: Hold PANW Stock for Now
Given the strong fundamentals and promising long-term growth prospects, it would be wise for existing shareholders to hold on to their Palo Alto Networks shares. The company is well-positioned to continue delivering robust growth, particularly as the demand for cybersecurity solutions remains strong.
However, for new investors looking to buy the stock, it might be prudent to wait for a more attractive entry point. The recent run-up has driven Palo Alto Networks' valuation to elevated levels, and a market correction or a period of consolidation could provide a better opportunity to invest in this high-quality stock. While Palo Alto Networks remains a strong long-term investment, patience could be key to maximizing returns.
Image: Bigstock
Palo Alto Shares Gain 23% in a Month: Is the Stock Still Worth Buying?
Palo Alto Networks, Inc. (PANW - Free Report) has been on a remarkable run, with its shares climbing 23.3% over the past month. This performance has significantly outpaced both the Zacks Computer and Technology sector's 9.6% gain and the S&P 500's 8.7% increase.
Compared to its peers, Palo Alto Networks stock has left competitors like Juniper Networks, Inc. (JNPR - Free Report) and Check Point Software Technologies Ltd. (CHKP - Free Report) in the dust, with these stocks only gaining 2.4% and 10.7%, respectively, in the same period.
Such rapid gains naturally lead investors to wonder: is Palo Alto Networks still a compelling buy, or is it time to lock in profits?
One-Month Price Return Performance
Image Source: Zacks Investment Research
What’s Behind Palo Alto Networks' Recent Rally?
The recent surge in Palo Alto Networks' stock price can be traced back to a few key factors. The broader market has become more optimistic. With recession fears easing and inflation seemingly under control, there’s growing anticipation that the Federal Reserve may soon cut interest rates. This has created a favorable environment for tech stocks, especially those like Palo Alto Networks, which are deeply embedded in sectors critical to the modern economy.
Adding to this bullish sentiment, Palo Alto Networks recently delivered stellar fourth-quarter results for fiscal 2024. It reported $2.19 billion in revenues, marking a 12% year-over-year increase and beating management’s higher-end guidance range as well.
This strong performance was driven by several factors, with one of the most notable being the 43% growth in Next-Generation Security Annual Recurring Revenue (NGS ARR), which reached $4.22 billion. This growth underscores Palo Alto Networks' ability to stay ahead of the curve by innovating and expanding its offerings to meet the ever-evolving cybersecurity landscape.
Bright Prospects for Palo Alto Networks
Palo Alto Networks is well-positioned to capitalize on the growing demand for cybersecurity solutions. As cyber threats become increasingly frequent and sophisticated, the need for cutting-edge security is only going to rise. Palo Alto Networks' ongoing investments in areas like cloud security, artificial intelligence and automation are likely to drive significant future growth, cementing its position as a key player in the cybersecurity space.
The numbers speak for themselves. The global cybersecurity market is expected to expand from $172.2 billion in 2023 to a staggering $424.97 billion by 2030, according to Fortune Business Insights. With its comprehensive and innovative solutions, Palo Alto Networks is well-poised to capture a significant share of this expanding market.
Strategic partnerships have also played a crucial role in Palo Alto Networks' long-term success. Earlier in 2024, the company teamed up with tech giants like NVIDIA Corporation (NVDA - Free Report) to offer robust private 5G security solutions. These collaborations enhance PANW’s capabilities in AI-driven threat detection, particularly in emerging markets like private 5G. Such moves not only strengthen the company’s market position but also ensure that its solutions remain at the cutting edge, catering to the evolving needs of modern enterprises.
Palo Alto Networks has successfully executed its platformization strategy, which focuses on providing customers with a more integrated suite of security solutions. By prioritizing Annual Recurring Revenue (ARR) over traditional billings, the company has set itself up for more stable and predictable cash flows. This strategy has resonated well with customers, particularly those making large strategic commitments, and sets the stage for sustained long-term growth.
The consensus estimates for fiscal 2025 and 2026 suggest that Palo Alto Networks will continue to see double-digit growth in both its top and bottom lines, reinforcing the bullish outlook on its future.
Image Source: Zacks Investment Research
PANW’s Premium Valuation: A Concern
Palo Alto Networks' recent share price performance has pushed its valuation to lofty heights. The stock currently trades at a forward 12-month price-to-sales (P/S) multiple of 12.7X, significantly higher than the Zacks Internet – Software industry average of 2.58X and well above its peers. For comparison, Juniper Networks and Check Point Software trade at more modest multiples of 2.48X and 8.18X, respectively.
Image Source: Zacks Investment Research
Conclusion: Hold PANW Stock for Now
Given the strong fundamentals and promising long-term growth prospects, it would be wise for existing shareholders to hold on to their Palo Alto Networks shares. The company is well-positioned to continue delivering robust growth, particularly as the demand for cybersecurity solutions remains strong.
However, for new investors looking to buy the stock, it might be prudent to wait for a more attractive entry point. The recent run-up has driven Palo Alto Networks' valuation to elevated levels, and a market correction or a period of consolidation could provide a better opportunity to invest in this high-quality stock. While Palo Alto Networks remains a strong long-term investment, patience could be key to maximizing returns.
Palo Alto Networks currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.